A ban on the sale of cigarettes to anyone who does not pay for a government smoking permit has been proposed by Health England, a ministerial advisory board.

The idea is the brainchild of the board's chairman, Julian Le Grand, who is a professor at the London School of Economics and was Tony Blair's senior health adviser. In a paper being studied by Lord Darzi, the health minister appointed to oversee NHS reform, he says many smokers would be helped to break the habit if they had to make a decision whether to "opt in".

The permit might cost as little as £10, but acquiring it could be made difficult if the forms were sufficiently complex, Le Grand said last night.

His paper says: "Suppose every individual who wanted to buy tobacco had to purchase a permit. And suppose further they had to do this every year. To get a permit would involve filling out a form and supplying a photograph, as well as paying the fee. Permits would only be issued to those over 18 and evidence of age would have to be provided. The money raised would go to the NHS."

Le Grand said the proposal was an example of "libertarian paternalism". The government would leave people free to make their own decisions but it would "nudge them" in the right direction.

He said there was a parallel in pensions law. If workers were automatically enrolled in a pension scheme, few would choose to opt out. But if they had to make a conscious decision to opt in, most people would stay out.

"Breaking the new year's resolution not to smoke would be costly in terms of both money and time ... [This] would probably have a greater impact on poor smokers than on rich ones, hence contributing to a reduction in health inequalities."

The paper, written by Le Grand and Divya Srivastava, an LSE researcher, acknowledges: "Administratively it would require addressing the problem of the existing black markets and smuggling in tobacco; but this should probably be done anyway."

They add: "Politically, this might be viewed by some as giving people a 'licence' to smoke; and by full-blooded libertarians as a subtle and hence even more dangerous form of paternalism - paternalism squared.

"On the other hand, the popularity even among smokers of the smoking ban in public places suggests that firm actions in this area can lead to political as well as health pay-offs."

The paper also proposes incentives for large companies to provide a daily "exercise hour" for employees and a ban on salt in processed food.

A Department of Health spokeswoman said last night: "We will be consulting later this year on the next steps for tobacco control. Ministers are looking for input from a full range of stakeholders."